MORAINE —  Consumers likely will cut spending at least through the rest of this year as the economy contracts because of higher energy prices and declining home values, an economist said Thursday, Oct. 2.

Ken Mayland, president of ClearView Economics LLC, said oil prices likely will fall, but because of lower demand brought on by a slowing economy. He made his comments during an economic forecast event sponsored by KeyBank.

Mayland said people should put today's economic problems — failing banks and a financial industry that some in government say needs rescued — in perspective. While there is upheaval, it has been confined to the financial sector, said Mayland, who supports a government bailout of the financial industry.

In the long haul, energy prices remain a concern. Alternative sources — be it ethanol, nuclear power, wind energy or discarded cooking grease — take years to put in place on a wide enough scale to make a dent in the energy situation, Mayland said.

In addition to fueling a massive transfer of wealth to other countries, the economist said, energy prices have taken a bigger chunk of consumers' disposable income. Consumers have compensated for this by cutting back on car purchases, while sales of durable goods such as furniture have stayed steady, he said.

As the economy softens, oil prices could drop to $80 per barrel, but within a couple of years oil could spike up to $150 per barrel, he said.

He looks for the automotive sector to continue to sputter in 2009 and he also expects for commercial construction to slow, he said.

While manufacturing started this year strong, the economist said he looks for the sector to slow down as consumers cut back on spending.

Mayland said that all economic crises end and he believes the country's economy in the long run will continue to grow.

"I'm optimistic about America's long-term prospects," he said.

Contact this reporter at (937) 225-7317 or ttresslar@DaytonDailyNews.com.